BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

Solutions

Chapter
Section
BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

A firm is a natural monopoly if it exhibits the following as its output increases:

a. decreasing marginal revenue.

b. increasing marginal cost.

c. decreasing average revenue.

d. decreasing average total cost.

To determine
The cause of the natural Monopoly.

Answer

Option ‘d’ is correct.

Explanation

Option (d):

Natural monopoly exists due to higher cost of production, and an increase in the output will decrease the average total cost. Thus, option ‘d’ is correct.

Option (a):

Under Natural monopoly, firms can control either the price or quantity to increase the sales. If firms increase the price, then there will be a fall in the output leading to a decrease in the marginal revenue. Thus, option ‘a’ is incorrect.

Option (b):

When the large firms maximize its output by increasing their quantity output, then the marginal cost decreases due to the benefits of economies of scale under monopoly. Thus, option ‘b’ is incorrect.

Option (c):

Under Natural monopoly, firms can control either the price or quantity which allows the firm to increase the average revenue by increasing the price. Thus, option ‘c’ is incorrect.

Concept

Concept introduction:

Monopoly: Monopoly is a market situation where a single firm exists with a large number of buyers without any available substitute.

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What are the disadvantages of a corporation?

Foundations of Business (MindTap Course List)

What are assurance services?

Accounting Information Systems

Why cant the Fed control the money supply perfectly?

Principles of Macroeconomics (MindTap Course List)

CALCULATION OF g AND EPS Sidman Productss common stock currently sells for 60.00 a share. The firm is expected ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Find all the answers to your study problems with bartleby.
Textbook solutions plus Q&A. Get As ASAP arrow_forward